Economy
By Yunus Yusuf, News Agency of Nigeria (NAN)
An analysis by Yunus Yusuf, News Agency of Nigeria (NAN)
MANY Nigerians have in recent times embraced the use of Liquefied Petroleum Gas (LPG), popularly known as cooking gas, encouraged by its speed in cooking and low health risk.
However, a persistent increase in the cost of cooking gas is now threatening to force average Nigerians to return to charcoal and firewood, with all their well known health hazards.
Indeed, since the beginning of the year, the price of gas has soared beyond the reach of the common man.
It now costs an average of N12,000 to refill a 12.5kg LPG in some parts of Lagos, while the cost of refilling a 5kg cylinder has also increased to N4,750 on average.
Some consumers are now lamenting the continuous increase in the price of cooking gas.
Mr Mike Samson, a businessman who went to Dikram gas depot in Surulere, Lagos, to purchase the product on Friday, said the price hike had become frustrating to consumers.
Samson said: “At this point, we are quite frustrated at the rate at which the price of every commodity in the market keeps surging every single day.
“Imagine the increase from last month to this month, and with every possibility that it might increase again in the next few weeks.
“The development forced some LPG users to shift to charcoal or firewood, as consumers of the commodity raised the alarm over the persistent hike in its price.
“The product has increased by 240 per cent for 12.5kg, moving up from N3,000 to N10,200 within the first 10 months of 2021.”
Mrs Alice Bamidele, a housewife, arrived at her usual gas depot in the Somolu area of Lagos, last week, to refill her 12.5kg gas cylinder but was surprised that what she bought about a month ago at N10,200 had increased to 11, 800.
She lamented that the increase would affect her family’s monthly budget, particularly because her husband, a civil servant, had fixed income.
Another Lagos housewife, Mrs Toun Philips, who resides in Ilupeju, Lagos, expressed her frustration thus: “I bought 12.5kg cylinder at this same depot last month for N10,000, only to be told today that it is now N12,200. This really destabilises my budget.
“What if I didn’t come with extra money, that would have meant that I would have gone back home and not purchased gas and definitely would not be able to cook food at home.
“The government doesn’t seem to be doing anything about the constant increase in the price of cooking gas.
“They (the government) have been encouraging us to use gas instead of charcoal, but with the way things are going, gas may no longer be within the reach of the common man,” she said.
Mrs Juliana Matthew, a restaurant owner, said the increase in the price of gas along with the hike in food prices, automatically increased the cost of production for her business.
“When I consider that I have to pay more for gas and the food items I buy from the market, I cannot help but reduce the quantity or quality of the food or maybe increase the price to make a substantial profit,” she said.
Similarly, the manager of a depot in Lagos, who declined to be mentioned, stated that the selling price at the depot was determined by how much the product was bought from the marketers.
“The increase is not really our fault. We also buy the product to sell to consumers. If there is an increase in price by the marketers, we also have to increase from our end to avoid losses.
“The problem is really from the top of the chain,” he claimed.
Mr Peter Chima, a retailer in the Ikotun area, Lagos, said one of the factors responsible for the high cost of cooking gas was the rising foreign exchange rate of the naira to the dollar.
“Aside from being a dealer, I’m also a gas consumer, so I understand how our customers are feeling. Gas is not the only thing that keeps increasing in price in Nigeria.
“A great percentage of locally consumed gas is being imported and you cannot rule out the factor of rising dollar and naira depreciation,” he said.
Mr Afolabi George an Energy Consultant, attributed the high cost of cooking gas to supply not matching the increase in demand.
He said the trend of switching to cleaner energy from local alternatives in the last one decade highlighted the interplay of the forces of demand and supply in the increase in the price of cooking gas.
“More than a decade ago, the demand was just about 60,000 metric tonnes per year as cooking gas was largely unpopular compared to kerosene.
“Today, we consume over 1 million metric tonnes per year. To meet up with the demand, we have to import.
“It is at this point that importers have to deal with the bottlenecks of scarcity of dollars, government’s recent introduction of 7.5 per cent value-added tax (VAT) and others,” he said.
George said the Russian/Ukraine war also led to shortage of supply of gas in the face of rising demand around the world.
“Russia is the world’s largest natural gas exporter. Due to the imposition of an embargo on its gas, countries like Nigeria that depend on the eastern European country for imports will feel the brunt.
“The price of cooking gas has more than doubled in the last one year.
“The rising LPG prices are a part of a general escalation of other daily living costs.
“Gasoline pump prices, electricity tariffs, basic prescription drug prices and urban mass transportation, form part of the determinants of the escalating living costs and declining living standards,” he added.
He explained that to establish the fundamentals that led to the increase in the price of cooking gas, there was need to understand the micro and macroeconomics of LPG in Nigeria and global trends that impacted the sector.
“First, Nigeria gets a little over 450,000 metric tonnes of LPG from its liquefaction company, the NLNG, co-owned by the Federal Government and three international oil companies, while the actual domestic demand stands at 1.3 million metric tonnes, a shortfall of 850,000 metric tonnes.
“These 450,000 metric tonnes of LPG represent about 100 per cent of its Butane production (Butane gas is less volatile and is suitable for cooking).
“And by committing 100 per cent of its Butane production, NLNG posits that it has prioritised the domestic market, thus meeting its domestic supply target,” he said.
He said in addition to that, NLNG still focussed on the exportation of the 22 million Tonnes Per Annum (MTPA) of LNG and 5 MTPA of Natural Gas Liquids (NGLs) it produced given its current capacity.
At the same time, he explained that several Nigerian upstream operators were setting up LPG extraction plants to cut down gas flaring and monetise gas.
Hence, NLNG supplies 40 per cent of domestic demand, while the balance is provided by other domestic producers or via imports.
George was emphatic that NLNG’s production alone was not sufficient as over one million metric tonnes of LPG was consumed by Nigerians in 2021, with over 50 per cent of the product imported by marketers.
“The implication is that we are a net importer of LPG and exposed to the vagaries of market forces and traders’ insatiable appetite for profit.
“LPG is a product priced in the international market. The vagaries of the price fluctuations in the global market affect the price of domestic LPG because over 50 per cent of LPG sold in Nigeria is imported and priced in dollars,” he said.
The concern of many Nigerians now is whether or not the price of cooking gas will continue to rise in 2023.
Mr Chika Umudu, Branch National Chairman of the Liquefied Petroleum Gas Retailers (LPGAR), Branch of NUPENG, said he looked forward to and hoped for a better future.
He said the union expected a better 2023 for the LPG sector in Nigeria.
“Better 2023, in terms of adequate supply, smooth distribution, safer supply, affordability and growth in usage of LPG in the country.
“Most importantly, we look forward to improvement in the processes of policy formulation regarding LPG in 2023.
“This has become necessary because the sector cannot attain the desired heights without people-oriented policy diligently implemented,” he said.
He said government had a lot to learn from the Indian model and it was good that the government, through the ministry of petroleum, held the India-Nigeria LPG summit in Abuja in October where stakeholders applauded the success of Indian model.
He said the lessons from the summit should be put into use to develop the sector in Nigeria.
“Having said the above, our association is not expecting magic in 2023 because available infrastructure and policy framework cannot move the sector forward except if there is urgent change in direction.
“2022 is not a good year for LPG sector in the country; it is a year that witnessed a decline in LPG usage contrary to the much-touted ‘Decade of Gas’ launched by the federal government in 2021 as a mark for attainment of gas sufficiency in the country.
“It is not good for government to promise Nigerians abundance of gas and the same gas becomes scarce and unaffordable shortly after the promise.
“This is one of the reasons that I have repeatedly linked low pace of LPG development in the country to overwhelming influence of the big commercial concerns in the policy direction of the government,” Umudu added.
He said: “I believe it was the assurances by the major marketers that misled the government into believing that the country had attained self sufficiency in LPG supply and distribution leading to the launch of the ‘Decade of Gas’ in 2021.
“Since early 2021, supply declined and price went up about 300 per cent, contrary to the assurances by the government.
“There is no better way to know that there is a poor policy direction in the sector and this has to be addressed to get the sector back on track.
“The Nigerian government should emphasise bottom-up development against its present top-down approach to the development of LPG in the sector,” he said.
Umudu said the Indian model exemplified the need for a bottom-up approach, especially in a developing country like Nigeria.
He said it was unimaginable that in a country with high rate of unemployment, the government adopted policies that were capable of negatively affecting small players in the sector in favour of big commercial entities, including multinationals.
“Instead of the major marketers to concentrate on production, importation and storage of LPG, they have in the recent years shifted their attention to retailing and the end-result is where we find ourselves presently,” he said.
Despite the high price of the product, the Nigerian Association of Liquefied Petroleum Gas Marketers (NALPGAM) has assured Nigerians of sustainable supply to meet demand.
President of NALPGAM, Mr Oladapo Olatunbosun, said NLNG remained committed to meeting domestic demand.
Olatunbosun further stated that the association had been assured by NLNG to keep producing LPG based on the feed gas it received from its gas suppliers, as production was expected to pick up after the flood receded.
The NALPGAM president also cautioned middlemen (Terminal owners/off-takers) in the LPG value chain not to take advantage of the hysteria in the market as a result of the flood, which also hampered the distribution of the product across the nation.
He confirmed that the NLNG had on Oct. 20, shipped a cargo of LPG into the domestic market.
“The dedicated vessel for shipment of LPG from the NLNG Plant in Bonny, Alfred Temile, arrived in Lagos to discharge the product to terminals in the state.
“The public should note that the supply of cooking gas from NLNG has not stopped.
“We should not give opportunity for further price hike due to speculated shortage of the product. We are already in hard times with the Russian/Ukraine war causing upset in the market,” he said.
The Managing Director and CEO, NLNG, Dr Philip Mshelbila, had promised Nigerians of 100 per cent supply.
The Federal Government had also assured Nigerians to take steps to bring down the cost of the product.
However, that is yet to manifest as consumers continue to lament the continuous price increase, pushing the product out of their reach.
Indeed, many families in Nigeria today are agonising over the constant increase in the price of cooking gas.
And, with the purchasing power of the Nigerians shrinking dramatically, any additional spike in prices of essential items will compound their woes. (NAN)
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